Discos may pass cost to consumers as NERC abolishes fixed charge

As the Nigerian Electricity Regulatory Commission (NERC) moves to finally abolish the N750 fixed charge that is paid monthly by electricity consumers in Nigeria, there is a rising concern that such costs may be moved directly by electricity distribution companies (Discos) into the tariff component for energy consumed by their customers.

The fixed charge is an element of customers’ electricity bill that is charged, intended to allow for the recovery the costs associated with the fixed or permanent investments required by energy firms to generate, transmit or distribute electricity.

These include poles, cables, transformers, and substations among others, as well as their cost of maintenance and the capacity charge paid to generating companies, as long as they are available to generate, transmit and supply energy.

NERC on Friday said it had concluded plans to finally abolish the N750 fixed charge component enshrined in the Multi Year Tariff Order (MYTO 2.1).

Sam Amadi, the chairman of NERC, made this known at the Commission’s headquarters in Abuja, where he was addressing a group of journalists during a media training for energy correspondents organised by NERC.

In a telephone chat with BusinessDay, Eric Olo, a general manager with North-South Power and owners of the Shiroro Hydro Power Plant, said that “NERC’s action will have ripple effects on other elements of the tariff plan and the rest of the electricity value chain.

“Already, there is a shortfall due to collection losses and the pressure on the Discos to repay the loans they secured from commercial banks, meaning that the latest shortfall coming from the fixed charge freeze will be transferred to consumers in the form of increased energy tariffs,” he said.

The abolition of the fixed charge now considered, is contrary to the position previously held by NERC in September, with respect to the fixed charge argument.

NERC said the fixed charge is a universal best practice and is not peculiar to Nigeria, and is to be borne by electricity consumers at all times.

As a  result of this, Amadi had earlier insisted that the fixed charge component of electricity tariffs could not be tampered with, stressing further that NERC would always protect the interest of consumers, as well as provide regulations that would support the business growth of electricity firms operating in the country.

“We are going to make sure that consumers are protected and we are also going to make sure that the industry’s revenues are supported,” Amadi posited.

This recent action is in reaction to a demand by the Nigerian Senate that the fixed charge be abolished, citing to public outcry over its imposition on the masses by electricity distribution companies (Discos).

The Senate had on August 11 asked NERC to immediately enforce the abolishment of fixed charges being collected from electricity users across the country.

The Upper House also ordered NERC to inquire into numerous complaints before it by consumers, in line with the provisions of Section 74, subsection (1)( b) of the Power Sector Reform Act (2005).

Discos were also urged to stop the practice of compulsory bulk metering of villages and communities in rural areas, on the ground  that a consumer should have the right to choose being part of the bulk metering scheme or not.

These resolutions were informed by a motion jointly sponsored by Senators Sam Egwu and David Umaru titled ‘Unfair Trade Practices of Discos in Nigeria.’

Egwu particularly lamented that the Discos had been ripping-off consumers through exhorbitant fixed charges and bulk metering all over the country since the takeoff of their operations in November 2013, a situation he said was unhealthy to the growth of the industry and must cease.

YANGE IKYAA